April 16, 2010
Source: First Financial Daily
As the Industrial Bank initiates share allotment, First Financial Daily secured an exclusive interview with bank president Mr. Li Renjie. In the interview, Mr. Renjie talked to us about the business management and credit strategies of the Industrial Bank this year.
Loans to Small Businesses to Increase by 23%
First Financial Daily: Since the beginning of this year, the banks have been tightening control over credit funds. Given the 40%, increase of credit funds last year, how is IB setting up its credit strategy and rhythm for this year?
Mr. Li Renjie: According to the financial budget scheme this year, IB is scheduled to increase loans by approximately 22% this year, with new loans estimated to reach RMB 153.3 billion. The growth rate of loans for small businesses is over 1% higher than the average growth rate of all IB's loans, and the loan-deposit ratio will be kept within 75%.
As for where loans will go, this year IB will closely follow the mainstream and trends in the development of the economy, earnestly implement macro-policy and financial monitoring orientation of the state, work out a rational layout, balance the structure, and pinpoint the phased priority for credit investment so as to guarantee the quality and gains of assets.
As for loans to small and medium enterprises, exclusive organizations for small businesses were set up at head office and in branches of IB last year to execute independent credit business processes, resources allocation and special incentive policy. Last year, the annual increase of loans to small businesses was RMB 117.2 billion, accounting for 69.49% of the newly added loans of the entire bank. This year IB will step up the design of featured products for small businesses, continue to upgrade professional services to SMBs and continue to expand credit investment in SMBs. This year, IB plans to increase the loans for small businesses by one percent above the loan growth average of the entire IB, and make sure the increment of credit will not be lower than last year. Small businesses with a loan amount of RMB 10 million or below will be given service priority. A special newly-added credit amount of RMB 20 billion for businesses of this kind is allocated in a bid to lend full support to the acceleration of small businesses and industrial upgrading
Strengthening Real Estate Loan Proportion Control and Structure Adjustment
First Financial Daily: For a long time, IB loans have been characterized by a high level of regional concentration and inclination towards the real estate industry. How do you view the issue of loan risk management?
Mr. Li Renjie: At present, IB loans primarily go to such economically developed regions as Fujian Province, Guangdong Province, Zhejiang Province, Shanghai, Beijing and Jiangsu Province. By the end of 2009, the loans supplied to the above-mentioned regions accounted for 56.47% of the loan total. It should be pointed out that this, on one hand, fits into the actual situation of regional economic development in our country and, on the other hand, mirrors the status of the Industrial Bank in the development of business outlets.
In terms of loan risk management, by the end of 2009, the balance of non-performing loans of the entire IB was RMB 3.779 billion, down RMB 369 million compared with the beginning of the period; the bad loan rate was 0.54%, down 0.29% compared with the beginning of the period. The special-mentioned loans totaled at RMB 7.479 billion, down RMB 3.574 billion compared with the beginning of the period, reaching an all time best; the provision coverage was 254.93%, up 28.35% compared with the beginning of the year, and representing a high level in the industry.
Looking specifically at the loans to the real estate industry, in recent years, IB has, on one hand, strengthened proportion control and structure adjustment (the loans to public real estate were down from 14% at the end of 2007 to 9.39% at the end of 2009), on the other hand, continued to tighten risk management control, enforced entry standards and conditions and intensified post-loan management: firstly, the head office must approve real estate development loans and screen out ineligible developers and projects so as to control the risk at the source; secondly, strictly implement the pertinent requirements of the China Banking Regulatory Commission (CBRC) to make further division of project management and capital monitoring; thirdly, enhance the research and evaluation of regional market risk and the management of projects through “one policy for one client” to make sure that there is differential treatment; fourthly, strengthen the evaluation of the value of the guaranty to make sure it suffices in value; fifthly, enhance the full-range process management of projects and reinforce the closed operation and scheduled reclaiming of capital. By the end of 2009, IB's bad loan rate for real estate was 0.42%, lower than that of the entire bank for same period.
Promoting Comprehensive Operation
First Financial Daily: Banks are drawing more attention to intermediary business as it does not utilize capital. The intermediary business of IB is relatively small in proportion. How do you intend to enhance this area of business? Do you have detailed strategic plans in this regard?
Mr. Li Renjie: IB was one of the first banks in China to advocate strategic transformation. Intermediary business that does not utilize capital has always been an important orientation for IB's strategic transformation. Currently, IB has established initial competitiveness and distinguished features in regard to derivative products in RMB, financial management in domestic and foreign currencies, precious metal brokering, agency sale and distribution of short-term financing bills and financial consultation for SMBs. Intermediary business has been growing well.
In 2009, IB's revenue from intermediary business (including foreign currency exchange gains or losses) was RMB 3.81 billion, constituting 12.09% of the business revenue, up slightly compared with the year before. Judging from revenue from intermediary business within the industry in recent years, the composite growth rate of revenue from intermediary business among listed joint-stock banks of the same type has stayed between 33% and 60%. IB's revenue from intermediary business has also recorded fast growth in recent years. Between 2004 and 2009, the composite growth rate was 63%, ranking first place among listed joint-stock banks.
First Financial Daily: Recently IB has also been proceeding with mixed operation. Last month, IB received approval to establish a financial leasing company. What is the plan of IB in mixed operation?
Mr. Li Renjie: In the future, IB's comprehensive operation will continue to be approached from the primary business of the bank, and we will contemplate specifically how to cement our unique features in business operation: first, we will propel comprehensive operation from within the bank by innovating the bank business system; second, we will continue to combine new establishment with mergers & acquisitions and strive to set up or invest in stock in banks and non-banking financial organizations so as to propel comprehensive operation from outside the bank.